Dot-com survivor reports a profit

Driven by its large share of state and local government Web portals, NIC Inc. reported Jan. 30 its second consecutive quarterly profit, outpacing expectations during a time that is traditionally slow.

The Overland Park, Kan.-based company reported a net income of $455,000 for the fourth quarter ending Dec. 31, 2002, compared with a net loss of $18.9 million in the same quarter the previous year.

Its total revenues increased by 15 percent for the quarter, hitting $10.8 million, with portal-related revenues growing by 20 percent compared to the fourth quarter 2001.

The growth in portal revenues is "a stepping stone to significantly better results as we move forward," said chairman and chief executive officer Jeff Fraser, during a Jan. 30 Webcast.

Fraser said NIC, which manages official government Web portals for 17 states and 8 local governments, has "mastered" the self-funding model, in which the company provides upfront costs to develop a portal and then recoups its investment by charging convenience or transaction fees, usually $1 to $2, on online applications used by businesses.

Several years ago, many governments resisted that approach. But that resistance has weakened in the face of significant revenue shortfalls. In some cases, a hybrid approach is being used in which a government spends some funds on a portal project and captures the rest through fees.

Fraser said the company is finalizing two new state contracts, which he declined to name. He said company executives are also meeting with each of the 24 new state governors or their administrations.

In recent weeks, the company announced that Kansas renewed its portal management contract for seven more years while Indianapolis/Marion County also extended management of its metropolitan portal for another three years.

Harry Herington, NIC's chief operating officer, said the company developed 65 revenue-generating applications in the fourth quarter, with another 120 in the development pipeline.

In the past year, NIC has undergone some major restructuring.

Last May, former CEO Jim Dodd left and co-founder Fraser resumed an active role. The company shed "ancillary" services including its e-procurement business and other holdings, said Chris Neff, director of integrated marketing. Other services were integrated with the company's core portal business.

"We're finally getting wise on how to manage our business," Neff said in an interview more than two weeks ago.

He said the company is also building "mini-portals" within portals. For example, Kansas launched a mini-portal just for its business community and is looking to do something for its transportation industry. "I think it's a great trend," he said.

By the end of the year, Neff said the company would like to build and manage portals for 20 states.


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